Securities and exchange commission

Three Months Ended			Nine Months Ended								Three Months				Nine   Months
		2018				2017				2018				2017				Ended				Ended
Aircraft and related equipment		$	591			$	284			$	1,631			$	1,319				108				24
Package handling and ground support equipment			207				295				621				819				(30	)			(24	)
Vehicles			237				219				748				737				8				1
Information technology			116				134				378				412				(13	)			(8	)
Facilities and other			221				177				616				503				25				22
Total capital expenditures		$	1,372			$	1,109			$	3,994			$	3,790				24				5
FedEx Express segment		$	860			$	479			$	2,316			$	2,034				80				14
FedEx Ground segment			227				387				974				1,127				(41	)			(14	)
FedEx Freight segment			198				152				397				360				30				10
FedEx Services segment			87				91				307				269				(4	)			14
Total capital expenditures		$	1,372			$	1,109			$	3,994			$	3,790				24				5

 

Capital expenditures increased during the nine months of 2018 primarily due to aircraft and related equipment purchases at FedEx Express, which included the delivery of ten Boeing 767-300 Freighter aircraft and three Boeing 777 Freighter (“B777F”) aircraft, increased spending on facilities and other at all of our transportation segments and increased vehicle purchases at FedEx Freight, partially offset by lower spending related to package handling and ground support equipment at FedEx Ground.

LIQUIDITY OUTLOOK

We believe that our cash and cash equivalents, cash flow from operations and available financing sources are adequate to meet our liquidity needs, including working capital, capital expenditure requirements and debt payment obligations. Our cash and cash equivalents balance at February 28, 2018 included $1.1 billion of cash in foreign jurisdictions associated with our permanent reinvestment strategy. We do not believe that the indefinite reinvestment of these funds impairs our ability to meet our domestic debt or working capital obligations. Although we expect higher capital expenditures in 2018, we anticipate that our cash flow from operations will be sufficient to fund these expenditures. Historically, we have been successful in obtaining unsecured financing, from both domestic and international sources, although the marketplace for such investment capital can become restricted depending on a variety of economic factors. We are currently re-evaluating our permanent reinvestment strategy as a result of the TCJA and, as of the date of this filing, any deferred tax liability associated with a change of assertion is not expected to be material.

Our capital expenditures are expected to be approximately $5.8 billion in 2018 and include spending for aircraft and aircraft-related equipment at FedEx Express, sort facility expansion, primarily at FedEx Ground, and new and replacement vehicles at all of our transportation segments. We expect to invest an additional $867 million for aircraft and aircraft-related equipment during the remainder of 2018. In addition, over multiple years, we will be investing over $1.5 billion to significantly expand the FedEx Express Indianapolis hub and over $1 billion to modernize and expand the Memphis SuperHub.

During the quarter, FedEx Express entered into an agreement to accelerate the delivery of two B777F aircraft from 2021 to 2020, one B777F aircraft from 2021 to 2019, and one B777F aircraft from 2022 to 2020.

Upon maturity of commercial paper during the fourth quarter of 2018, we will re-evaluate our short-term liquidity needs and assess whether to issue additional commercial paper in order to maintain this short-term liquidity.

We have a shelf registration statement filed with the SEC that allows us to sell, in one or more future offerings, any combination of our unsecured debt securities and common stock.

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During the quarter, we amended our five-year revolving credit facility to increase the aggregate amount available under the facility from $1.75 billion to $2.0 billion. The facility expires in November 2020. See Note 3 of the ac companying unaudited condensed consolidated financial statements for a description of the terms and significant covenants of our revolving credit facility.

During the nine months of 2018, we have made contributions totaling $2.5 billion to our U.S. Pension Plans, of which $22 million were required. We do not expect to make any additional contributions to our U.S. Pension Plans during the fourth quarter of 2018. Our U.S. Pension Plans have ample funds to meet expected benefit payments.

Standard & Poor’s has assigned us a senior unsecured debt credit rating of BBB and commercial paper rating of A-2 and a ratings outlook of “stable.” Moody’s Investors Service has assigned our unsecured debt a credit rating of Baa2 and our commercial paper a rating of P-2 and a ratings outlook of “stable.” If our credit ratings drop, our interest expense may increase. If our commercial paper ratings drop below current levels, we may have difficulty utilizing the commercial paper market. If our senior unsecured debt credit ratings drop below investment grade, our access to financing may become limited.

CONTRACTUAL CASH OBLIGATIONS AND OFF-BALANCE SHEET ARRANGEMENTS

The following table sets forth a summary of our contractual cash obligations as of February 28, 2018. Certain of these contractual obligations are reflected in our balance sheet, while others are disclosed as future obligations under accounting principles generally accepted in the United States. Except for the current portion of interest on long-term debt, this table does not include amounts already recorded in our balance sheet as current liabilities at February 28, 2018. We have certain contingent liabilities that are not accrued in our balance sheet in accordance with accounting principles generally accepted in the United States. These contingent liabilities are not included in the table below. We have other long-term liabilities reflected in our balance sheet, including deferred income taxes, qualified and nonqualified pension and postretirement healthcare plan liabilities and other self-insurance accruals. The payment obligations associated with these liabilities are not reflected in the table below due to the absence of scheduled maturities. Accordingly, this table is not meant to represent a forecast of our total cash expenditures for any of the periods presented.